Squeeze on UK households eases, but inflation fears mount: Markit

A row of terraced houses glows in the afternoon sunshine in Oldham, Britain November 23, 2016.Phil Noble

LONDON, Dec 14 (Reuters) - British households are currently feeling the least financial pressure since May 2015, buoyed by the economy's solid response to June's Brexit vote, but they are increasingly worried about higher inflation next year, a survey showed on Wednesday.

December's Markit Household Finance Index was one of the strongest since the survey started in February 2009, due to a greater sense of job security and busier workplaces.

Consumer spending has powered Britain's economy since the referendum, helped by a strong jobs market. But economists say growth will slow next year as June's slump in sterling fuels inflation and eats into disposable income.

Households' expectations for their finances in a year's time produced one of the weakest readings of the past three years and inflation expectations rose to their highest since August 2014.

"Stronger inflation, along with stagnant pay and an uncertain Brexit agenda, looks to be behind households' worries about the future," Philip Leake, an economist at survey publishers IHS Markit, said.

The contrast between the resilience of Britain's economy since the referendum and the uncertain outlook have appeared in other data. The unemployment rate in the third quarter stood at an 11-year low but consumer price inflation hit a two-year high of 1.2 percent last month and is expected to rise to about 3 percent next year.

Mirroring Markit's findings, a Bank of England survey last week showed the strongest expectations for inflation among the public since August 2014.

Markit said the public now saw the slimmest chance of a BoE interest rate cut since the referendum, and more than half of those surveyed expected rates to rise from their record low 0.25 percent before the end of next year.

The survey was based on polling of 1,500 adults between Dec. 7 and Dec. 11 by market research company Ipsos MORI.